Senate Finance Committee Completes Markup of Health-Care Bill

Senate Finance Committee Completes Markup of Health-Care Bill

October 2, 2009

FEI Summary

The Senate Finance Committee finished “markup” of a health-care reform bill early Friday after working through 564 amendments offered during the past two weeks. There is a possibility that a committee vote could take place the week of Oct. 5.

However, Chairman Max Baucus (D-Mont.) expressed the possibility of reconvening the committee if the budget estimates from the Congressional Budget Office is higher than the bill writers can accept. Baucus’ estimate prior to the markup process was that the bill will cost less than $900 billion, an increase from estimates released when the bill was first revealed last month. President Obama has signaled that he would like to see the bill under the $900 billion mark and that it is fully paid for.

Before the Senate Finance version can move to the Senate floor, it must be agreed to by the panel and then meshed with legislation passed out of the Senate Health, Education, Labor and Pensions (HELP) Committee in July (the legislation from HELP includes the controversial “public option”). Many centrist Democrats are demanding that CBO has a chance to provide a cost estimate for the legislative language of the newer versions of the bill. This request is out of fear that members may cast a vote on a measure that includes costs higher than expected and open themselves up to attacks from the right. Therefore, until the CBO estimate is in place, many questions remain as to who will support the measure.

The much talked-about public option was left out of the Finance bill in favor of “insurance cooperatives.” Other highlights of the bill include an individual mandate to purchase insurance or face a penalty that could reach $1,900 per year and tax breaks to help those who cannot afford the price of insurance. The following is a summary of potential taxation and other administrative impacts to business. Separately, the summary provided by Sen. Baucus can be found here.

• Impose a 40 percent, nondeductible excise tax on health insurers if the aggregate value of employer-sponsored health coverage for an employee exceeds a threshold amount (generally, $8,000 for individual coverage and $21,000 for family coverage for 2013, indexed for inflation plus 1 percentage point). Those in high-risk professions and retirees over the age of 55 are exempt from the provision. 
• Require reimbursement to the government for each full-time employee (maximum of $400 per employee whether they are receiving a tax credit or not) working 30 or more hours a week that is not receiving employer-sponsored coverage and also receiving a health-care affordability tax credit. 
• Impose an excise tax penalty and interest on employers that report to insurers and plan administrators (and the Internal Revenue Service) a lower amount of insurance cost subject to the excise tax than required. 
• Increase from 7.5 percent to 10 percent the adjusted gross income (AGI) threshold for claiming the itemized deduction for medical expenses for taxpayers 65 and older. 
• Require an employer to disclose the value of the benefit provided by the employer for each employee's health insurance coverage on the employee's annual Form W-2, beginning in 2010 (raises a negligible amount of funds, but will create an administrative burden on employers). 
• Conform the definition of medical expenses for health flexible spending arrangements to the definition of the itemized deduction for medical expenses (including prescription purchases of over-the-counter medicines). 
• Increase to 20 percent the additional tax on distributions from a health savings account (HAS) that is not used for qualified medical expenses, effective in 2010. 
• Limit annual salary reductions by an employee for purposes of coverage under a health FSA under a cafeteria plan to $2,500, effective in 2013. 
• Require information reporting on aggregate payments over $600 to corporations for property and services, effective for payments made in tax years beginning after 2011. 
• Impose additional requirements and new reporting and disclosure on tax-exempt hospitals, effective for tax years beginning after date of enactment. 
• Reduce the business deduction for retiree prescription drug expenses by the amount of excludible federal subsidy payments received, effective in 2011. 
• Limit deductions for executive compensation for health insurance providers to $500,000 if at least 25 percent of the firm’s gross income is derived from the bill’s mandates – under current law the threshold is $1 million. 
• Fees on the Health-Care Industry:
• Impose a non-deductible fee on persons that manufacture or import prescription drugs for sale in the United States, beginning in 2010. The aggregate fee on the sector would be $1.7 billion annually and would be apportioned each year based on relative market share of covered domestic sales for the prior year.
• Impose a non-deductible fee on persons that manufacture or import medical devices offered for sale in the U.S., beginning in 2010. The aggregate fee on the sector would be $2.9 billion in 2010, would raise to $3 billion in 2011 and would be apportioned each year based on relative market share of covered domestic sales for the prior year.
• Impose a non-deductible fee on any U.S. health insurance provider, beginning in 2010. The aggregate fee on the sector would be $6.7 billion in 2010 and would be apportioned each year based on relative market share for the prior year. 

Prepared Oct. 2, 2009, by Chris Graham (cgraham@financialexecutives.org), associate manager, Government Affairs, Financial Executives International (FEI). This summary does not represent FEI opinion unless specifically noted above.